Alibaba Loan Repayment – Looking for $8 Billion in BondsAuthor: Don MillerLast Updated: December 20, 2019 Alibaba Group Holding Ltd. Plans to raise up to $8 billion as early as next week in its first bond sale, after completing the largest public stock offering ever last week. As Asia’s biggest internet company, Alibaba will refinance its credit facilities using the proceeds of the sale.At this time, the S&P 500 gave the bonds an A+ rating, which is the first highest grade for investments and a rating equivalent to Moody’s Investors Service’s A1.This loan would be in addition to the $25 million collected by Alibaba in September’s initial public offering, the biggest share sale recorded. According to data collected by Bloomberg, this China-based ecommerce group has a market capitalization of nearly $300 billion and in loans and credit lines, $11 billion.As stated by Nathan Barnard, fixed-income analyst at Leader Capital Corporation in Oregon, considering Alibaba just had their IPO so it does not necessarily have to come to market and is relatively flush with capital. This is yet another example of a company being opportunistic in trying to take advantage of low rates when possible.If the company were to raise $8 billion, the bond sale would be the largest in Asia ever denominated in US dollars, surpassing the Bank of China Ltd that was able to raise $6.5 billion in October by selling off additional Tier 1 securities.The additional yield, investors demand to hold bonds worldwide opposed to government debt falling to 1.05% this past June, being the lowest recorded in seven years. According to the Bank of America Merrill Lynch Global Corporate Index, since then, premiums have risen 1.19%.For investment-grade ecommerce companies, the average cost of borrowing is at 2.7%, based on bond yields sold by eBay, Inc. and Amazon.com, Inc. Debt will be marketed to investors beginning next week by Citigroup, Inc. Deutsche Bank AG, Morgan Stanley, and JPMorgan Chase & Co.Meetings in Hong Kong will start on November 17 followed by meetings in Singapore on November 18 and the US on November 19, with a five-part bond sale being considered, as well as four portions of fixed-rate notes and one tranche of floating rate debt.These ratings are a clear reflection of Alibaba’s dominant position in the online shopping market for China. Fitch Ratings Ltd also believes the ratings are a huge benefit from the company’s cash generation and strong profitability.Fitch also feels that Alibaba will be able to keep its ratio of debt-to-cash flow under 1.5 times, as well as maintain a conservative capital structure along with a strong net cash flow over the next few years.In looking at the $4 billion term loan obtained in 2013, it pays 2.75% points over the London interbank offered rate. Libor, which is the rate that banks say Alibaba can borrow from, is roughly 0.23% point.By refinancing the $8 billion loan using proceeds from banks, Alibaba would be able to modify covenants on yet another revolving facility of $3 billion to match the new notes. Those covenants on the $3 billion borrowing match those on the $8 billion facility significantly, with the exception that under the $3 billion revolver, the company does not need to keep a minimum level of reserve cash.According to the $8 billion loan terms, Alibaba must maintain a maximum of 3:1 ratio for the offshore group leverage, as well as a 4:1 ratio of interest coverage.Alibaba provides buyers and sellers marketplaces and services to conduct business. The company stock gained 69% since the September sale, advancing yester to $114.84. The primary marketplaces include Taobao and Tmall.com. Earlier in the month, Alibaba reaped a record $9.3 billion specific to online sales.Get more information : Further information on raising finance through loans or payday loans can be found here.